Computational Software for Intelligent System Design

Cadence Design Systems, Inc. Computational Software for Intelligent System Design

Investor Presentation Q1 2020 Safe Harbor Statement and Regulation G

Safe Harbor Statement

The following discussion contains forward-looking statements based on current expectations or beliefs, as well as a number of preliminary assumptions about future events that are subject to factors and uncertainties that could cause our actual results to differ materially from those expectations or results described in the forward-looking statements. You are cautioned not to put undue reliance on these forward-looking statements, which are not a guarantee of future performance and are subject to a number of risks, uncertainties and other factors, many of which are outside Cadence’s control.

Additional information concerning factors that could cause such a difference can be found in our filings with the U.S. Securities and Exchange Commission, which include our most recent reports on Form 10-K and Form 10-Q and future filings, and the cautionary statements regarding forward-looking statements in our press release dated April 20, 2020 (including those relating to the COVID-19 pandemic). We expressly disclaim any duty to update the forward-looking statements provided in the following discussion.

Regulation G

In addition to financial results prepared in accordance with Generally Accepted Accounting Principles, or GAAP, this presentation will contain certain non-GAAP financial measures. Cadence management believes that in addition to using GAAP results in evaluating our business, it can also be useful to measure results using certain non-GAAP financial measures. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures with their most direct comparable GAAP financial results, including those set forth in our April 20, 2020 press release and our CFO Commentary for the quarter ended March 28, 2020, both of which can be found in the quarterly earnings section of the investor relations portion of our website at cadence.com.

3 © 2020 Cadence Design Systems, Inc. All rights reserved. Cadence at a Glance Computational technology for Computational Software and Innovation, 20+ designing today’s electronic systems software for Intelligent programming significant new products System Design™ ~3 years

Revenue Employees (2019) Silicon Valley $618M (Q1 2020) Worldwide (Q1 2020)

Very high customer renewal rates and loyalty Nasdaq: CDNS; S&P 500 and Nasdaq 100 indexes Source: Cadence Earnings Press Release, April 2020 https://www.cadence.com/en_US/home/company/newsroom/press-releases/pr-ir/2020/cadence-reports-first-quarter-2020-financial-results.html

R&D FIELD PATENTS GLOBAL ENGINEERS ENGINEERS WORLDWIDE DEVELOPMENT CENTERS

Source: Cadence Earnings Press Release, April 2020 https://www.cadence.com/en_US/home/company/newsroom/press-releases/pr-ir/2020/cadence-reports-first-quarter-2020-financial-results.html

Pay Equity ▪ No statistically significant differences in salaries based on gender in countries where Cadence has employees

Recognition ▪ Ranked #1 in technology category on Investor’s Business Daily List of the Top 50 ESG Companies

Carbon Emissions Reduction ▪ 12% decrease in CO2e emissions per full-time employee (compared to 2018)

Best Workplace Recognitions ▪ 23 offices across 13 countries

Electric Vehicle Charging Stations ▪ 240% increase in charging stations at headquarters

Sustainability ▪ Products that help customers with sustainability Source: Cadence sustainability report https://issuu.com/cdns/docs/cadence_2019_sustainability_report?fr=sOGJjODE0NzMxNA ▪ Tempus™ Power Integrity ▪ Celsius™ Thermal Solver 7 © 2020 Cadence Design Systems, Inc. All rights reserved. Intelligent System Design Strategy

Deep Learning System Design and Data Science Optimization Excellence

Automotive and 5G and Distributed and Industrial Disruption Edge Computing Cloud Computing

Explosion of Data and AI Computational Needs

System Design AI / ML Algorithm, HW, SW, Data Analytics Multi-Physics

Exponentially Growing Cost and Lack of Moore, CPU and Complexity of Silicon Design EDA Software Performance Scaling IC, Package, PCB

INTELLIGENT

System Design AI / ML Algorithm, HW, SW, Data Analytics SYSTEM Multi-Physics

DESIGN EDA IC, Package, PCB

Intelligent System Design

Merger of EDA, system design, AI Pervasive intelligence throughout design Grounded in computational engineering

Co-optimizing system, hardware, software Spanning multiple system domains

Consumer Hyperscale Mobile Communications Automotive Aero / Defense Industrial Health

PERVASIVE • Machine Learning Technology INTELLIGENCE • Artificial Intelligence Enablement

SYSTEM INNOVATION • System Interconnect and Analysis – IC Packaging, Printed Circuit Board, System Analysis, and RF • System and Embedded Software Partnerships DESIGN EXCELLENCE • Custom IC Design and Simulation • Digital IC Design and Signoff • Functional Verification • Intellectual Property

Cloud Enabled — Partnerships with Ecosystem Leaders

12 © 2020 Cadence Design Systems, Inc. All rights reserved. • The Intelligent System Design™ strategy drives growth in our core EDA and IP business, broadens our reach in system companies Intelligent and targeted verticals, and guides expansion into newer adjacent System Design – areas. Expanding Beyond • The foundation of the strategy continues to be delivering semiconductor device design excellence via our core EDA and IP Traditional EDA business. In addition, we are building upon our core competency in computational software to expand into two new areas:

o System innovation, where we are expanding into new system domains, and

o Pervasive intelligence, where we will apply AI and our algorithmic know-how to our core business and specific verticals

• The Intelligent System Design™ strategy will enable us to provide more capabilities and value to our customers, while also expanding our total addressable market from about $10 billion to an estimated $30 billion over the next five years.

• Some of our recent activities in the system innovation space includes:

o A strategic partnership with Green Hills Software, which opens new opportunities in the estimated more than $3 billion embedded system safety and security space

o In April 2019, we entered the system analysis market, an estimated $4.5 billion total addressable market opportunity, with our first product for this space, the Clarity™ 3D Solver, a next-generation solution for electromagnetic field simulation, and in September 2019, we expanded our presence with the introduction of the Celsius™ Thermal Solver, delivering the industry’s first complete electrical-thermal co-simulation solution

o Acquisition of AWR Corporation, from National Instruments, to supply key microwave and mmWave design tools crucial for design of RF electronics for 5G, aerospace and defense, and automotive applications

Pervasive Intelligence • HW/SW-optimized Tensilica® DNA100 edge computing • JasperGold® ML machine learning-enabled smart formal verification PERVASIVE • Machine learning research collaboration with NVIDIA and Carnegie-Mellon INTELLIGENCE • Data Analytics System Innovation Platform • Clarity™ 3D and Celsius™ Thermal solvers for system analysis SYSTEM • Industrial IoT INNOVATION • Secure Green Hills Software bring-up with Palladium® and Protium™ platforms • System Analysis • Embedded SW • Acquired AWR RF technology for microwave and mmWave design DESIGN • Security Design Excellence EXCELLENCE • Optimized PPA results with Cadence® digital full flow Core • Machine learning innovations for custom IC, PCB, digital, and verification (EDA and IP) • Spectre® X high-speed, high-capacity circuit simulator

Only with Cadence

2019

Revenue Non-GAAP EPS1 1 2500 $2.00 Revenue $1.75 2000 $1.50 1500 $1.25 $1.00

($millions) 1000 $0.75 $0.50 Non-GAAP 500 operating $0.25 1 0 $0.00 margin 2012 2013 2014 2015 2016 2017 2018 2019 2012 2013 2014 2015 2016 2017 2018 2019

Free Notes: 1. Non-GAAP operating margin and non-GAAP EPS (excludes amortization of acquired intangibles, stock-based compensation, non-qualified deferred compensation cash flow expenses and certain non-recurring cash expenses). See quarterly earnings releases and CFO Commentary for reconciliations to GAAP measures.

High visibility software revenue stream 700 Revenue 600 • Recurring revenue mix: 85 - 90% for 2020 500 • Backlog1: $3.7B (Q1 2020) 400

300 ($millions) 200 100 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 • 7.1% (Q1’20/Q1’19)

Notes: 1. Backlog = Remaining Performance Obligations + IP Access Agreements

Functional Verification Americas 14% 7% 23% China Digital IC Design and 9% 19% Signoff 43% Other Asia Custom IC Design and Simulation 25% 29% 18% EMEA System Interconnect and 13% Analysis Japan IP

Non-GAAP Operating Margin1 35% 30% 25% 20% • Focus on growth and disciplined ROI-centric 15% resource allocation 10% 1 • Non-GAAP operating margin 32% (Q1 2020) 5% 0% 2012 2013 2014 2015 2016 2017 2018 2019 TTM Q1'20

Notes: 1. Non-GAAP operating margin and non-GAAP EPS (excludes amortization of acquired intangibles, stock-based compensation, non-qualified deferred compensation expenses and certain non-recurring cash expenses). See quarterly earnings releases and CFO Commentary for reconciliations to GAAP measures.

Free cash flow generation • $655M (2019)

Capital structure (Q1 2020) Free cash flow Stock repurchase 1200 800 • Cash: $946M 1000 600 • ST credit facility: $350M 800

400 600 ($ millions)($

• LT debt: $350M millions)($ 400 200 200 0 0 Capital allocation 2012 2013 2014 2015 2016 2017 2018 2019 TTM 2012 2013 2014 2015 2016 2017 2018 2019 TTM • Internal investment Q1'20 Q1'20 • M&A • Repurchase stock

• Data-driven economy and its supporting technology waves combined with our Intelligent System Design™ strategy expand TAM

• Culture of innovation creates the products for category leadership and growth

• Growth, focus, and discipline drive financial performance

22 © 2020 Cadence Design Systems, Inc. All rights reserved. © 2020 Cadence Design Systems, Inc. All rights reserved worldwide. Cadence, the Cadence logo, and the other Cadence marks found at https://www.cadence.com/go/trademarks are trademarks or registered trademarks of Cadence Design Systems, Inc. Accellera and SystemC are trademarks of Accellera Systems Initiative Inc. All Arm products are registered trademarks or trademarks of Arm Limited (or its subsidiaries) in the US and/or elsewhere. All MIPI specifications are registered trademarks or service marks owned by MIPI Alliance. All PCI-SIG specifications are registered trademarks or trademarks of PCI-SIG. All other trademarks are the property of their respective owners.